Undergrads: Log On, Cash In Drop Out?

Steve Oskoui is wrestling with something a number of Stanford University students have faced over the years. Guys like, oh, John McEnroe, John Elway, Tiger Woods. The luxurious dilemma: Should I stay and graduate from one of the nation's top universities--or turn pro and start cashing seven-figure checks?

You won't be seeing Oskoui in a Gatorade commercial, however. He isn't an Olympic swimmer or a golden-footed field-goal kicker. His arena is the Internet, where he already has started two companies and sold one. Last spring, Oskoui, a 20-year-old computer-science major, says an Internet portal company that he's not allowed to name offered him "several million dollars" for a shopping-robot technology he and a buddy dreamed up as part of a computer-science project. After some agonizing, he turned it down--mainly because the company insisted he would have to leave school and come along with it. Now, another potential buyer has emerged, and the hand-wringing starts again.

Call Oskoui and a growing list of his friends at Stanford's vaunted engineering and computer-science departments the bonus babies--dot.com style. Venture capitalists and entrepreneurs have long prowled Stanford's bike paths, mainly looking for faculty members and grad students. Now, they're romancing undergraduates. "It's real," says Tom Kosnik, an engineering school professor. "We don't keep statistics as to how many we lose, and I think the real number is small. But Steve is not a blowhard, and seven figures is not a lot of money these days. The biggest [venture-capital] firms are putting money down way, way, way early to tie up talent," says Kosnik.

KEEPING MUM. Bill Gates is high tech's dropout poster boy, of course--having left Harvard University after his freshman year to head down what was then the information dirt road. But Oskoui and his compadres were toddlers when Microsoft Corp.'s chairman chucked his mortarboard. Their inspiration is much closer to home, the procrastinating Stanford PhD candidates David Filo and Jerry Yang, who dreamed up portal Yahoo! Inc. and became billionaires.

At least Filo and Yang were graduate students. In Scotts Valley, Calif., 10 Stanford undergraduates, mainly from engineering and computer science, have pledged to drop out of school in the fall to work full-time on a startup called Woosh! Inc. CEO Ralph Garvin Jr. says his backers won't let him release any other details on his funding or product. He says, however, "we have promised one another we will all graduate--eventually." Leaving school "is like Cortez burning his ships. You succeed because you have to succeed," he says. It struck me that secrecy's not a bad idea here: With this youthful crew, a competitor could probably shut the whole operation down by sending over a keg of beer and then calling the cops.

Meanwhile, a startup called College411.com is incubating at the San Francisco venture firm Net Value Holdings. The team includes five Stanford undergraduates who are trying to create a portal aimed at college students. "Everyone wants to do a startup," says Lawrence R. Gentilello, 20, who has temporarily left his studies to handle corporate partnerships for College411. Darr Aley, a director of Net Value Holdings who's on the board of College411, insists: "This is not a whimsical investment. These kids are undying in their passion and the hardest working staff I've ever seen."

STARTUP COMPETITION. All this frenetic action puts Stanford in a tricky position. On one hand, the university has worked hard to set up exactly the kind of scenario that is in fact now unfolding. Decades ago, Engineering Dean Fred Terman set the tone, backing David Packard and Bill Hewlett and other early electronic pioneers. That created Silicon Valley.

More recently, Stanford has supported all kinds of entrepreneurial initiatives, from classes to internships. Now in its third year, the spring "Entrepreneur's Challenge" business-plan contest, run by a student group, has taken on the drama of National Football League draft day. Students are invited to submit startup ideas and have them critiqued by some of the biggest venture backers in the Valley. The nominal prize is $25,000, provided by a local VC firm. But venture capitalists routinely push business cards at students whose ideas don't even make the final cut. "If you have a good idea, you have money available," says Kristen D. Growney, a business school student whose "Summit" team came up with a women-oriented E-commerce site idea that was a recent winner. She subsequently discussed financing ranging from $250,000 to $1 million with Valley venture capitalists.

The prospect of students derailing their schooling with a long-shot startup gives some faculty members pause. Tom Byers, one of the school's most plugged-in profs and the brother of Brook H. Byers, a leading venture capitalist at Kleiner Perkins Caufield & Byers, for example, teaches a wildly popular undergraduate entrepreneurship course. Tom Byers acknowledges that "the students are so much more mature in professional or performance-oriented things than in lifelong character issues. That's a dichotomy that's a little dangerous."

"OVERWHELMINGLY POSITIVE." Byers says he's getting fed up with entrepreneurs hounding him at parties to introduce them to students. At least 10% of the students in his last class came to him to talk about leaving school for startups. He pointed out they'll have 40 or 50 years of opportunities and completing their degree is important.

Stanford officials note that the university makes it easy for students to return to school and finish their degrees, even if they've taken a few quarters off. Besides, even when startup adventures flop and students come back to school, says Senior Associate Engineering Dean John Bravman, "all the students I've talked to have been overwhelmingly positive about what they've learned."

I was impressed that Oskoui followed the lead of Elway (who stayed to graduate) and not McEnroe and Woods. "I've often been the kind of student who has been so into my work that I haven't invested in friends," Oskoui tells me. "I've grown since I've come to Stanford. I'm investing in my social development." Oskoui's also learning a lot this summer at an internship at chipshot.com, a red-hot E-commerce company selling custom golf equipment. It's run by 23-year-old CEO Amar Goel, a recent Harvard grad who has already raised--hello--$21 million.

I think Oskoui's maturity is rarer than a manual typewriter in the Valley these days. But not everybody who hears his story gets misty-eyed. I told a venture capitalist about Steve, and she looked at me through narrowed eyes, incredulous that he wouldn't take the big bucks. "Are you sure the offer wasn't an I.Q. test?" she whispered. Ouch. Welcome to the big leagues, kid.

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